EA to have a common currency by 2012

The East African Community projects to have a common currency by 2012.

According to the Community Secretariat, a joint study on the proposed harmonised Monetary Union has already kicked off and is expected to end later this month.

This week, the team spearheading the study team led by European central bank consultants is visiting Bujumbura, where it will hold a consultative meeting on the proposed unified currency. Similar meetings have already been held in Nairobi, Dar es Salaam, Kigali and Kampala. The last one will be conducted in Arusha next week.

Targeted in the study are the central banks of the EAC partner states and their, ministries of finance, planning, EAC Affairs and trade. Others are capital markets, bureaus of statistics and the banking fraternity.

"The purpose of these visits is to meet with the various stakeholders in the process towards Monetary Union and to make them acquainted to those matters which are likely to arise in this process," Kenya's EAC Minister Amason Kingi told The EastAfrican.

Critical to the study is the preparedness of the region to for a common Monetary Union.

Also featuring prominently are the legal implications of the proposed currency shift. The findings of the study are expected to be released next January.

The EAC Secretariat says the region will begin setting up the necessary legal and institutional framework.

Leading economists say it is time the region formed a common central bank and currency to be competitive in the global market and attract foreign investment.

African Union Commissioner for Economic Affairs Maxwell Mkwezalamba says that a common monetary system will enhance intra-East Africa trade, initiate competition and put the region in the global picture as a business hub.

"The creation of a Monetary Union can be seen as a fundamentally political issue, though with important economic implications. Currency unions are generally formed as part of a larger strategic push to integrate the countries entering such unions," Mr Mkwezalamba said, adding, "The decision to embark on a currency union is a major policy decision."

But is the region ready for the proposed union? Though a desirable move, analysts say the region should approach it cautiously. A unanimous argument is that the merger will create a more stabilised currency that will be less prone to inflationary pressures.